Yew Huoi, How & Associates | Leading Malaysia Law Firm

Menu

FRAUD, KNOWING ASSIST, KNOWING DECEIT – DIRECTORS AND SIGNATORIES PERSONALLY LIABLE FOR DEBTS

Q: I own a timber supply company. We were engaged by a manufacturing company (“Company A”) to supply timber since 2011. Starting 2 years ago, Company A had got behind payments of our bills. Thus, we have brought the matter to court. The court ordered Company A to pay us the amount due. One month after the decision of the court in November 2020, Company A went into liquidation. I came to know that Company A did receive payments amounting to millions in October 2020. The company however transferred millions out and allow Company A to be wound up. What can I do?

A: You may file an application to the court to hold the directors or signatories of the bank account personally responsible for knowingly transferring the monies to defraud its creditors under Section 540 of the Companies Act 2016 (“CA 2016”).

Q: What happened if the directors or signatories of the bank account claimed they have no knowledge where the monies go?

A: Although the burden of proving fraudulent intent in s.540 CA 2016 is on the Plaintiff i.e. you and your company, however, you may ask the court to draw adverse inference against the directors and signatories of the bank account of the company. The directors and signatories of the bank account of the company must explain how the monies received before winding up are dealt with. Failure to do so would attract adverse inference to be drawn against them.

Q: What happened if the directors claimed he was under the instruction of other directors to transfer out the monies and has no knowledge to any fraud.

A: Anyone who knowingly be a party to fraud is liable to the fraud. It is sufficient if he turned a “blind-eye” i.e. deliberately shutting his eyes to the obvious and remains liable for fraud.

Q: Can my company and I applied for the directors to personally pay my company the debt due instead of the liquidator as there are other creditors who had filed proof of debt when Company A was wound up?

A: Section 540 of the CA 2016 is wide enough to allow the court to order payment directly to the applicant/creditors who file in the application under s.540 of the CA 2016 OR the liquidator of the company. However, the court is likely to order payment to the liquidator so that the monies can be shared in pari passu with the other general unsecured creditors.

Case in point : Tetuan Sulaiman & Taye v Wong Poh Kun & Anor. KL High Court no. WA-22NCC-364-08/2018

Back to Latest Legal Updates

Sorotan Terkini

CIVIL PROCEDURE – STRIKE OUT UNDER ORDER 18 RULE 19(1)(A),(B) RULES OF COURT 2012 – EXTENSION OF TIME APPLICATION

In Badan Pengurusan Subang Parkhomes v Zen Estates Sdn Bhd [2025] MLJU 3591, the High Court reaffirmed that non-compliance with Order 37 Rule 1(5) of the Rules of Court 2012 does not automatically invalidate assessment of damages proceedings. The Court held that procedural rules must be read with the overriding objective of ensuring justice, and that the six-month time limit to file a Notice of Appointment is directory, not mandatory. Finding no prejudice to the defendant and noting active case management by the plaintiff, the Court dismissed the developer’s strike-out bid and allowed an extension of time for assessment to proceed. The decision underscores the judiciary’s commitment to substantive fairness over procedural rigidity in post-judgment proceedings.

Read More »
16 November ,2025 Tiada Ulasan

TORT – PURE ECONOMIC LOSS BAR REAFFIRMED: MMC LIABLE FOR NEGLIGENCE BUT PROTECTED FROM LOST PROFIT CLAIMS

In Asia Pacific Higher Learning Sdn Bhd v Majlis Perubatan Malaysia & Anor [2025] MLJU 3144, the High Court awarded over RM2 million in damages against the Malaysian Medical Council (MMC) for negligence, breach of statutory duty, and misfeasance during its accreditation of Lincoln University College’s medical programmes. While the court allowed direct financial losses such as survey costs, it barred claims exceeding RM550 million for lost profits, reaffirming the Federal Court’s rulings in Steven Phoa and UDA Holdings that pure economic loss is not recoverable from public or statutory bodies. The second defendant was further ordered to pay RM100,000 in exemplary damages for acting with targeted malice, marking a rare personal liability finding against a regulatory officer.

Read More »
16 November ,2025 Tiada Ulasan

ERINFORD INJUNCTION – COURT OF APPEAL CLARIFIES: EX-PARTE ERINFORD INJUNCTIONS ARE THE EXCEPTION, NOT THE RULE

In Edisijuta Parking Sdn Bhd v TH Universal Builders Sdn Bhd & Anor [2025] 5 MLJ 524, the Court of Appeal clarified that ex parte Erinford injunctions at the appellate stage should only be granted in truly exceptional circumstances where giving notice would defeat the purpose of the order. Wong Kian Kheong JCA held that, under rule 50 of the Rules of the Court of Appeal 1994, such applications should generally be heard inter partes to ensure fairness and prevent abuse. Exercising powers under section 44(1) of the Courts of Judicature Act 1964, the Court granted a conditional interim Erinford injunction pending appeal, fortified by a RM200,000 deposit and an undertaking to pay damages. The ruling provides clear guidance on balancing urgency, procedural fairness, and judicial efficiency in appellate injunctions.

Read More »
16 November ,2025 Tiada Ulasan

TOTAL FAILURE CONSIDERATION – FEDERAL COURT OVERRULES BERJAYA TIMES SQUARE: TOTAL FAILURE OF CONSIDERATION REDEFINED

In Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong [2025] 6 MLJ 327, the Federal Court unanimously overruled Berjaya Times Square Sdn Bhd v M Concept Sdn Bhd and clarified that the doctrine of total failure of consideration applies only to restitutionary relief, not to contractual termination. The Court held that the correct test is whether the promisor has performed any part of the contractual duties in respect of which payment is due, adopting Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574. Finding that the appellants had partly performed their obligations and the respondent had derived benefits, the Court rejected the respondent’s claim for restitution and restored the appellants’ contractual claim. The landmark decision restores clarity between contract and restitution, reinforcing commercial certainty in Malaysian law.

Read More »
16 November ,2025 Tiada Ulasan

CONTRACT (BILL OF LADING) – NO DUTY TO DETECT FRAUD: COURT CLEARS MAERSK OF LIABILITY FOR FALSE CONTAINER WEIGHTS

In Stournaras Stylianos Monoprosopi EPE v Maersk A/S [2025] 2 Lloyd’s Rep 323, the English Commercial Court held that carriers are not liable for fraudulent misdeclarations by shippers where bills of lading are issued for sealed containers. The Court ruled that Maersk had no duty to verify or cross-check declared weights against Verified Gross Mass (VGM) data under the SOLAS Convention, as its obligation under the Hague Rules extended only to the apparent external condition of cargo. However, the judgment signals that a limited duty of care could arise in future where a carrier is put on notice of fraud. For now, carriers may rely on shipper declarations, but consignees must exercise commercial vigilance and due diligence when relying on bills for payment.

Read More »
16 November ,2025 Tiada Ulasan

EXEMPLARY DAMAGES – STATUTORY BODY DUTY – DAMAGES – OBTAINING APPROVAL

In Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290, the Federal Court reinstated nearly RM3.56 million in special damages and awarded RM100,000 in exemplary damages against TNB for wrongfully disconnecting electricity to an ice factory. The Court ruled that “strict proof” of special damages does not mean a higher burden beyond the civil standard of proof and affirmed that TNB, as a statutory monopoly, breached its statutory duty by using disconnection as leverage to collect payment. The judgment underscores that public utilities cannot misuse statutory powers, and consumers wrongfully deprived of essential services may be entitled to punitive remedies in exceptional cases.

Read More »
16 November ,2025 Tiada Ulasan
ms_MYMY
en_USEN zh_TWZH ms_MYMY
× Hubungi Kami